RSC Equipment Rental posted a 33-percent decrease in rental revenues for the second quarter, with $271 million, down from $405 million for the second quarter of 2008. Total revenues were $327 million, down 27.3 percent from $449 million reported in the year-ago quarter.
Rental volume declined 25.5 percent from the prior year’s second quarter following the drop in non-residential construction business levels and lower industrial activity. Rental rates declined by 7.7 percent compared with the year-ago quarter. Fleet utilization averaged 57.5 percent compared with 71.6 percent in the second quarter of 2008. The company generated net capital expenditure inflows of $38 million, continuing to benefit from a well-maintained and relatively young fleet, which minimized replacement needs.
The company continued to aggressively manage its cost structure, reducing its cost of rental and SG&A expenses by $43 million compared with the second quarter a year ago. Headcount was reduced by 79 employees, while location closures were limited to one, as the company had already taken strategic actions to downsize its footprint in previous quarters. Since the beginning of 2008, the company has closed 58 or 12 percent of its locations and reduced its number of employees by 1,029 or 19 percent. The company also opened seven locations in the second quarter, bringing the year-to-date openings to 14, primarily in locations that presented industrial growth opportunities. Industrial/non-construction revenues accounted for 55 percent of total rental revenues in the second quarter of 2009.
Operating income was $24 million, or 7.2 percent of total revenues, compared with $114 million or 25.5 percent of total revenues in last year’s second quarter. The impact of the rental revenue decline exceeded the benefits of cost reductions. Second-quarter adjusted EBITDA was $108 million or 33.1 percent of total revenues, compared to $207 million or 46.1 percent of total revenues last year.
Despite the declines, an obvious result of economic conditions, Erik Olsson, president and CEO was positive about a number of developments. “First and foremost, we delivered another quarter of strong cash flows and remain on track to meet our free cash flow guidance of $340 - $370 million for the full year 2009,” Olsson said. “We continued to right-size the business to current demand, while also continuing to position the company for the future with seven new location openings. We executed well on our priorities and, as a result, demand for our fleet has stabilized over the past four months and utilization was trending up towards the end of the quarter. Lastly, we successfully concluded a major refinancing of the company in July, enhancing liquidity and extending maturities, which will provide significant financial and operational flexibility going forward.”
Rental revenue for the first six months of 2009 dropped 28.2 percent to $558 million, compared with $777.2 million for the same period of 2008. Total revenues for the period plunged 22.2 percent, from $871.1 million for the first six months of 2008 to $677.8 million this year.
The company’s expectations for the third quarter and remainder of 2009 aren’t dramatically different, although, the company said, declines on a sequential basis appear to be moderating and utilization improved in the latter part of the second quarter. The company expects rental revenues of $255 to $270 million for the third quarter, total revenues in the $310 million to $325 million range and Q3 free cash flow between $90 million and $100 million.
Based in Scottsdale, Ariz., RSC Equipment Rental is No. 2 on the RER 100.
